Report finds Irish housing subsidy not key price driver - source

Reuters Staff

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DUBLIN, Sept 10 (Reuters) - A state-commissioned report into an Irish government subsidy for first-time home buyers introduced last year has found it has not been a key factor in driving up house prices, a government source said on Sunday.

Prime Minister Leo Varadkar accelerated the review of the “help to buy scheme” when he assumed office in May and said that if it was driving up prices, it would be phased out and replaced with incentives for increasing housing supply.

But ministers have been less critical of the potential inflationary effects of the measure in recent weeks and the Sunday Times newspaper, which reported details of the review, said the government was expected to adjust rather than scrap it.

The review outlines ways the government could amend the measure, the Sunday Times said. These include cutting the tax break in half or using the fund to take equity in a first-time buyer’s home.

The scheme, which provides a tax rebate for prospective homebuyers and is limited to new builds in an attempt to stimulate house building, is due to run until 2019.

House price growth has begun to accelerate in Ireland in recent months, climbing 11.6 percent in the year to the end of June amid a chronic lack of supply, particularly in bigger cities.

While prices are 29 percent below the peak hit a decade ago before a property crash drove Ireland into an international bailout, residential rents Dublin are 8 percent above the 2007 peak and homelessness has been rising rapidly. (Reporting by Padraic Halpin; Editing by Mark Potter)